Critical Path Reports Fourth Quarter and Year-end Results; Bartlett to Succeed DeBuono as CFO.Business Editors SAN FRANCISCO--(BUSINESS WIRE)--Feb. 5, 2003 Critical Path, Inc. (Nasdaq:CPTH), a global leader in digital communications Transmitting text, voice and video in binary form. See communications. software and services, today announced financial results for the fourth quarter and fiscal year ended December December: see month. 31, 2002. Total net revenues for the quarter increased 14% to $21.8 million from the $19.2 million reported in the third quarter. Cash operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , excluding special charges, depreciation and amortization, decreased 5% to $26.0 million from the $27.4 million reported in the third quarter. Earnings before interest, taxes, depreciation, and amortization Earnings before interest, taxes, depreciation, and amortization (EBITDA) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ), excluding special charges, amounted to a loss of $4.2 million for the quarter, an improvement of $4.0 million compared to the EBITDA loss, excluding special charges, of $8.2 million for the third quarter of 2002. Based on Generally Accepted Accounting Principals (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), net loss attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to common shares for the fourth quarter was $34.2 million, or $0.43 per share, inclusive of inclusive of prep. Taking into consideration or account; including. a $5.3 million charge for revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. of a derivative instrument Noun 1. derivative instrument - a financial instrument whose value is based on another security derivative legal document, legal instrument, official document, instrument - (law) a document that states some contractual relationship or grants some right embedded Inserted into. See embedded system. in the preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. , compared to a net loss of $29.6 million, or $0.38 per share for the third quarter of 2002. "We're we're Contraction of we are. we're we are very pleased with our positive Q4 results and the progress we've we've Contraction of we have. we've have made," commented William William, crown prince of Germany William or Frederick William, 1882–1951, crown prince of Germany, son of William II. In World War I he commanded (1914) an army on the Western Front and was nominal commander in the German attack McGlashan, Jr., chairman and chief executive officer. "We believe we're starting 2003 on a solid foundation to build a profitable business this year." Total net revenues for fiscal year 2002 were $87.1 million, compared with overall net revenues of $104.2 million and core revenues of $82.2 million in 2001, which represents a 6% increase in the ongoing business of Critical Path. Cash operating expenses, excluding special charges, amortization and depreciation, were $108.8 million, compared with $164.4 million in 2001. EBITDA, excluding special charges, for the year significantly improved to a loss of $21.7 million, compared with a loss of $60.2 million for the prior year. GAAP net loss attributable to common shares for the year was $131.8 million, or $1.69 per share, compared with a net loss attributable to common shares of $79.8 million, or $1.08 per share, for 2001, which includes a extraordinary gain on the retirement of the Company's convertible subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes of $179.3 million. CFO See Chief Financial Officer. Transition The Company also announced today the appointment of Paul Paul, 1901–64, king of the Hellenes (1947–64), brother and successor of George II. He married (1938) Princess Frederika of Brunswick. During Paul's reign Greece followed a pro-Western policy, and the Cyprus question was temporarily resolved. Bartlett as executive vice president and chief financial officer, effective February February: see month. 13, 2003. He succeeds Laureen DeBuono, who has chosen to step down as CFO, but will aid in the transition through March. "I would like to thank Laureen for her extraordinary work during the Company's turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. . She played an integral role in restoring Critical Path to financial health, restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). the business, and building a solid finance team. With the restructuring of the Company complete, Laureen has chosen to move on to assist other companies in need of financial restructuring," McGlashan said. "I am pleased to announce Paul's appointment as CFO. He is a seasoned business executive with public company experience and a track record of managing companies during periods of tremendous growth." Bartlett, 42, came to Critical Path with a background in operations and financial management. He was formerly a director and president of Hall Kinion and Associates, a staffing, services and recruiting company, where, under his leadership, revenue grew from $30 million annually as a private company to $200 million annually as a public company. As a director, then COO (Cell Of Origin) See mobile positioning. , of Quintus Quintus (the fifth, see Quintus (name)) may refer to:
Large financial-services conglomerates combine commercial banking and investment banking, and sometimes insurance. in their corporate finance departments. He has an economics undergraduate degree “First degree” redirects here. For the BBC television series, see First Degree. An undergraduate degree (sometimes called a first degree or simply a degree from Princeton University Princeton University, at Princeton, N.J.; coeducational; chartered 1746, opened 1747, rechartered 1748, called the College of New Jersey until 1896. Schools and Research Facilities and an MBA MBA abbr. Master of Business Administration Noun 1. MBA - a master's degree in business Master in Business, Master in Business Administration from Stanford University Stanford University, at Stanford, Calif.; coeducational; chartered 1885, opened 1891 as Leland Stanford Junior Univ. (still the legal name). The original campus was designed by Frederick Law Olmsted. David Starr Jordan was its first president. . Guidance The Company expects that overall market conditions will remain challenging, limiting its ability to forecast financial results. For the first quarter of 2003, Critical Path expects to report substantially flat revenues in the range of $20 million to $22 million. Resulting from the cost-reduction action taken early in the first quarter, quarterly cash operating expenses are expected to decrease to approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $25 million to $26 million. The Company expects to reach the EBITDA break-even point break-even point - In the process of implementing a new computer language, the point at which the language is sufficiently effective that one can implement the language in itself. by the end of the second quarter of 2003 through continued decline in expenses, in the range of 8% to 12%. Conference Call Critical Path will hold a conference call today to discuss the fourth quarter and year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. results. Those who would like to participate in the conference call should dial 877/231-3543 or 706/634-1329 (international) prior to 4:50 PM ET on the day of the call. The conference call and its replay will also be Web cast and are accessible from the Company's Web site, www.criticalpath.net. A telephone replay of the conference call will be available for seven days following the call. To access the replay, please dial (800) 642-1687 or (706) 645-9291 (international), passcode 7659668. About Critical Path, Inc. Critical Path, Inc. (Nasdaq: CPTH) is a global leader in digital communications software and services. The company provides messaging solutions -- from wireless, secure and unified messaging Having access to e-mail, voice mail and faxes via a common computer application or by telephone. For example, unified messaging may send faxes and digitized voice mail to a mail server that turns them into e-mail attachments. to basic email and personal information management -- as well as identity management solutions that simplify user profile management and strengthen information security. The standards-based Critical Path Communications Platform, built to perform reliably at the scale of public networks, delivers the industry's lowest total cost of ownership for messaging solutions and lays a solid foundation for next-generation communications services. Solutions are available on a hosted or licensed basis. Critical Path's customers include more than 700 enterprises, 190 carriers and service providers, eight national postal authorities A postal authority organises collection and delivery of domestic mail (US), or post (UK), within its area of control, or in the case of foreign mail, delivery to or receipt of mail from other postal authorities. Payment for the service has been performed in many ways. and 35 government agencies. Critical Path is headquartered in San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden . More information can be found at www.criticalpath.net Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. : This press release may contain forward-looking statements, including the Company's statements regarding its finance, business, operations, results and projections including anticipated or projected revenue, expenses and operational and market growth. The words "anticipate," "expect," "intend," "plan," "believe," "seek," and "estimate" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, difficulties of forecasting future results due to our limited operating history, failure to meet revenue objectives, sales forecasts Sales forecast A key input to a firm's financial planning process. External sales forecasts are based on historical experience, statistical analysis, and consideration of various macroeconomic factors. and earnings guidance, failure to negotiate favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. deals with strategic partners for technology and for the distribution and resale resale n. selling again, particularly at retail. In many states a "resale license" or "resale number" is required so that the state can monitor the collection of sales tax on retail sales. RESALE. of our products and services, failure to reach profitability in the short term and further reduce cash operating expenses, challenges associated with our evolving business strategies and the emerging nature of the market for our products and services, failure to achieve anticipated cost savings and efficiencies through reductions in force and outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. of operations and service providers, litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and other distractions associated with the execution of world wide reductions in force, the effects of reductions in force on our remaining workforce and our ability to service customers and meet strategic goals in timely manner, lingering lin·ger v. lin·gered, lin·ger·ing, lin·gers v.intr. 1. To be slow in leaving, especially out of reluctance; tarry. See Synonyms at stay1. 2. doubts related to the SEC investigation of former executive officers and directors, turnover within and integration of senior management, board of directors members and other key personnel, difficulties in delivering and marketing our product and service offerings, protection of our intellectual property, failure to successfully expand our sales and marketing activities, potential difficulties associated with restructuring, strategic relationships, investments and uncollected bills, difficulties in general economic conditions and in markets in which the Company does business, volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the in the market for stock and risks associated with delisting Delisting When the stock of a company is removed from a stock exchange. Notes: Reasons for delisting include violating regulations and/or failure to meet financial specifications set out by the stock exchange. actions by the Nasdaq National Market on which we are listed, risks and doubts associated with both the operation and viability of the Company and the liquidity of and market for its stock should its common stock be delisted, risks associated with litigation of various forms, challenges related to our international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. , foreign currency fluctuations, unplanned system interruptions, capacity constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. , software defects. These and other risks and uncertainties are described in more detail in Critical Path's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended December 31, 2001 and the Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. the for quarters ended March 31, June June: see month. 30 and September September: see month. 30, 2002, all as may be amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. from time to time, and all subsequent filings with the Securities and Exchange Commission (www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. ). Note to Editors: Critical Path and the Critical Path logo are the trademarks of Critical Path, Inc. TABLES TO FOLLOW
CRITICAL PATH, INC.
Condensed Consolidated Balance Sheet
(In thousands)
Dec. 31, Dec. 31,
2001 2002
------------ ----------
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $59,463 $33,498
Short-term marketable securities 9,702 5,583
Accounts receivable, net 26,692 22,818
Other current assets 5,367 4,030
------------ ----------
Total current assets 101,224 65,929
Long-term marketable securities - 3,990
Equity investments 7,215 357
Property and equipment, net 36,285 18,142
Goodwill 29,311 6,613
Intangible assets, net 19,330 -
Restricted cash 2,674 2,729
Other assets 3,913 6,246
------------ ----------
Total assets $199,952 $104,006
============ ==========
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable $25,955 $28,093
Accrued expenses 6,232 3,764
Deferred revenue 10,297 10,788
Capital lease and other obligations,
current 3,431 3,323
------------ ----------
Total current liabilities 45,915 45,968
Convertible subordinated notes payable 38,360 38,360
Capital lease and other obligations, long-term 1,149 1,332
------------ ----------
Total liabilities 85,424 85,660
------------ ----------
Mandatorily redeemable preferred stock 5,373 26,747
Shareholders' equity (deficit) 109,155 (8,401)
------------ ----------
Total liabilities, mandatorily
redeemable preferred stock
and shareholders' equity
(deficit) $199,952 $104,006
============ ==========
CRITICAL PATH, INC.
Condensed Consolidated Statement of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
--------------------- --------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2001 2002 2001 2002
----------- --------- --------- ----------
(Unaudited)
Net revenues
Software license $8,773 $7,436 $30,960 $35,176
Hosted messaging 8,241 5,886 43,821 24,893
Professional services 2,050 3,957 12,573 11,593
Maintenance and support 4,094 4,554 16,819 15,471
----------- --------- --------- ----------
Total net revenues 23,158 21,833 104,173 87,133
----------- --------- --------- ----------
Cost of net revenues
Software license 599 1,246 1,534 2,682
Hosted messaging 9,764 6,468 59,124 29,303
Professional services 2,190 3,017 10,315 10,020
Maintenance and support 2,244 2,121 10,080 8,670
Amortization of purchased
technology 4,970 4,631 21,283 18,522
Stock-based expense 647 135 4,051 1,225
Impairment of long-lived
assets 12,446 - 16,654 -
----------- --------- --------- ----------
Total cost of net
revenues 32,860 17,618 123,041 70,422
----------- --------- --------- ----------
Gross profit (loss) (9,702) 4,215 (18,868) 16,711
----------- --------- --------- ----------
Operating expenses
Sales and marketing 7,932 10,201 53,356 43,604
Research and development 5,155 4,320 30,745 19,649
General and
administrative 7,775 3,933 42,261 22,128
Amortization of
intangible assets 2,486 6,206 13,216 24,773
Acquisition-related
retention bonuses 326 - 1,381 11
Stock-based expense 11,655 452 53,613 8,772
Restructuring expense 6,007 1,629 18,267 3,168
Impairment of long-lived
assets - - 9,991 -
----------- --------- --------- ----------
Total operating
expenses 41,336 26,741 222,830 122,105
----------- --------- --------- ----------
Loss from operations (51,038) (22,526) (241,698) (105,394)
Interest and other income
(expense), net 342 (5,051) 5,841 (5,852)
Interest expense (503) (729) (14,714) (2,985)
Equity in net loss of joint
venture (347) - (1,866) (1,408)
Loss on investments - (1,530) (702) (1,530)
Gain on retirement of
convertible subordinated
notes, net 38,242 - 179,282 -
----------- --------- --------- ----------
Net loss before income
taxes (13,304) (29,836) (73,857) (117,169)
Provision for income taxes (1,933) (724) (5,606) (979)
----------- --------- --------- ----------
Net loss (15,237) (30,560) (79,463) (118,148)
Accretion on redeemable
convertible preferred
shares (356) (3,600) (356) (13,667)
----------- --------- --------- ----------
Net loss attributable to
common shares $(15,593) $(34,160) $(79,819) $(131,815)
=========== ========= ========= ==========
Net loss per share -
basic and diluted
Net loss attributable to
common shares $(0.21) $(0.43) $(1.08) $(1.69)
=========== ========= ========= ==========
Weighted average common
shares outstanding 75,501 78,557 73,981 77,782
The following supplemental alternative measurement financial
information presents Critical Path's condensed consolidated results of
operations during the three-month and twelve-month periods of 2001 and
2002, excluding the impact of certain special charges consisting of
(i) amortization of intangible assets associated with purchase
business combinations and financing transactions, (ii) accruals for
employee retention bonuses associated with purchase business
combinations, (iii) stock-based compensation associated with
outstanding options and warrants, (iv) one-time charges related to
restructuring initiatives, (v) write-down of investments, (vi)
impairment of long-lived assets, (vii) extraordinary gains on
retirement of convertible subordinated notes, (viii) gain (loss) on
adjustment to market of the preferred stock instrument, and (ix)
accretion on redeemable convertible preferred shares. This
supplemental presentation is for informational purposes only, and is
not intended to replace the consolidated operating results prepared
and presented in accordance with generally accepted accounting
principles.
CRITICAL PATH, INC.
Alternative Measurement Condensed Consolidated Statements of Operations
Excluding Special Charges
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
-------------------- ---------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2001 2002 2001 2002
---------- --------- ---------- ----------
(Unaudited)
Net revenues
Software license $8,773 $7,436 $30,960 $35,176
Hosted messaging 8,241 5,886 43,821 24,893
Professional services 2,050 3,957 12,573 11,593
Maintenance and support 4,094 4,554 16,819 15,471
---------- --------- ---------- ----------
Total net
revenues 23,158 21,833 104,173 87,133
---------- --------- ---------- ----------
Cost of net revenues
Software license 599 1,246 1,534 2,682
Hosted messaging 9,764 6,468 59,124 29,303
Professional services 2,190 3,017 10,315 10,020
Maintenance and support 2,244 2,121 10,080 8,670
---------- --------- ---------- ----------
Total cost of
net revenues 14,797 12,852 81,053 50,675
---------- --------- ---------- ----------
Gross profit 8,361 8,981 23,120 36,458
---------- --------- ---------- ----------
Operating expenses
Sales and marketing 7,932 10,201 53,356 43,604
Research and
development 5,155 4,320 30,745 19,649
General and
administrative 7,775 3,933 42,261 22,128
---------- --------- ---------- ----------
Total operating
expenses 20,862 18,454 126,362 85,381
---------- --------- ---------- ----------
Loss from operations (12,501) (9,473) (103,242) (48,923)
Interest and other income
(expense), net 342 229 5,841 1,690
Interest expense (503) (729) (14,714) (2,635)
Equity in net loss of
joint venture (347) - (1,866) (1,408)
---------- --------- ---------- ----------
Loss before income taxes (13,009) (9,973) (113,981) (51,276)
Provision for income taxes (1,933) (724) (5,606) (979)
---------- --------- ---------- ----------
Net loss $(14,942) $(10,697) $(119,587) $(52,255)
========== ========= ========== ==========
Net loss per share -
basic and diluted $(0.20) $(0.14) $(1.62) $(0.67)
Weighted average shares -
basic and diluted 75,501 78,557 73,981 77,782
EBITDA (1) $(2,888) $(4,152) $(60,228) $(21,700)
========== ========= ========== ==========
(1) Earnings before interest, taxes, depreciation and
amortization, equity in net loss of joint venture and one-time charges
identified in the following table. EBITDA is calculated by adding
depreciation of $9.6 million, $5.3 million, $43.0 million and $27.2
million, respectively, back into loss from operations.
The following table reconciles the alternative measurement
financial data presented above to the consolidated operating results
prepared and presented in accordance with generally accepted
accounting principles ("GAAP").
Three Months Ended Twelve Months Ended
-------------------- ---------------------
Dec.31, Dec. 31, Dec. 31, Dec.31,
2001 2002 2001 2002
---------- --------- ---------- ----------
(Unaudited)
Supplemental alternative
measurement net loss $(14,942) $(10,697) $(119,587) $(52,255)
Amortization of
purchased technology (4,970) (4,631) (21,283) (18,522)
Amortization of
intangible assets (2,486) (6,206) (13,216) (25,121)
Acquisition-related
retention bonuses in
operating expenses (326) - (1,381) (11)
Restructuring expense (6,007) (1,629) (18,267) (3,168)
Impairment of long-lived
assets (12,446) - (26,645) -
Stock-based expense in
cost of revenue (647) (135) (4,051) (1,225)
Stock-based expense in
operating expenses (11,655) (452) (53,613) (8,772)
Loss on investments in
non-operating expense - (1,530) (702) (1,634)
Gain on retirement of
convertible subordinated
notes 38,242 - 179,282 -
Preferred stock
instrument marked to
market - (5,280) - (7,440)
---------- --------- ---------- ----------
Subtotal of amounts
excluded from
alternative measurement
net loss (295) (19,863) 40,124 (65,893)
---------- --------- ---------- ----------
GAAP net loss (15,237) (30,560) (79,463) (118,148)
Accretion on redeemable
convertible preferred
shares (356) (3,600) (356) (13,667)
---------- --------- ---------- ----------
GAAP net loss attributable
to common shares $(15,593) $(34,160) $(79,819) $(131,815)
========== ========= ========== ==========
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